Historically, banks loaned out money and kept it safe--no more and no less. Merchant banks and investment banks represent how certain banks have evolved from distant service providers to involved partners.
Merchant banks invest their own capital into corporate clients. A merchant bank will assess the value of a company and invest its money into it, sometimes taking a very large ownership interest in the company. Merchant banks specialize in international finance. Multinational corporations use this expertise to facilitate their international transactions.
Investment banks raise outside capital for corporate clients. They handle initial public offerings, trade securities and facilitate mergers and acquisitions. They also perform research to advise clients on financial matters prior to their making investment and capitalization decisions.
Neither merchant nor investment banks serve the general public. Instead, both serve publicly and privately held corporations. Both merchant and investment banks perform underwriting functions for their corporate clients.
Sophia Lopen began her work as a writer in 2010. Her background is in the sales, service and operations side of the banking industry. She holds a Juris Doctorate from John Marshall Law School and a Bachelor of Business Administration in management from Texas State University.